Since the HR function serves many independent departments, and sometimes even distinct offices or subsidiaries in disparate locations, it’s critical to standardize systems and processes. This is the only way to ensure a consistent approach to administering base salary for all employees. The best place to start this process is by posing key questions that will help bring appropriate issues front and center for your consideration. In this blog entry, you’ll find high-level questions to ask relating to:
- Market considerations
- Salary range structure
- On-going administration
- Cost implications
- How will we define our competition in the various markets in which we operate?
- How will we reflect pay differences for the geographic markets in which we operate?
- How will we reflect pay differences based on size and complexity of our locations?
- What is our desired competitive position relative to the markets we compete in?
Salary Range Structure
- Will jobs be grouped into salary grades or will each job have its own unique range?
- If we use salary grades, will different offices have the same grade structures?
- How wide will the ranges be (from minimum to maximum)?
- Will all ranges have the same width or will they vary by job size or other factors?
- If we have salary grades, how will we assign jobs to grades?
- If we have unique ranges for each position, who will be involved in creating and approving those ranges?
- What factors will drive salary range adjustments?
- How often will ranges increase?
- What factors will determine salary increases? (i.e., competencies, experience, tenure, licensure, accreditation, etc.)
- What factors will determine where employees fall in their range? (i.e., knowledge, skills, abilities, performance, tenure, qualifications, etc.)
- How will we ensure employees are moving to the appropriate location in the range?
- How long should it take employees to move locations in the range?
- How will we handle employees who are paid over the range maximum? (i.e., freeze pay, lump sum increases, other?)
- How will we handle employees whose pay is in the range but higher than it should be based on their performance or other pertinent factors?
- Are we willing to give zero increases? Under what circumstances?
- What differentials (i.e., overtime, call-in, on-call, etc.) will we offer? who will be eligible to receive these differentials? How much is each one worth?
- Where should new hires come into the range?
- What is considered a promotion and how much additional is a promotion worth?
- Should we reserve a minimal amount of “headroom” between managers and their highest paid subordinates?
- Will salary ranges increase every year?
- Will each location receive the same or different salary increase budgets? If different, based on what factors?
- What level of assurances will we give employees with regard to future increases?
- Will managers have discretion when it comes to determining an employee’s salary increase or will the increase be determined automatically based on predefined factors (i.e., performance versus position in range)?
- What happens if one or more locations runs into financial difficulties? Can that location suspend salary increases while the others continue to grant increases?
Creating a consistent compensation philosophy that addresses issues will promote effective compensation practices. Stay tuned for future blog entries where these questions are answered.